October 22, 2020

Cayman Islands SPVs and US FATCA (Including Cayman CLO Issuers)


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Services-Banner-FACTAArticle by Alasdair Robertson, Mark S Matthews, Scott Macdonald and Nicola Bashforth From Maples & Calder Updated: 2 December 2013

Further to our prior client updates on the US Foreign Account Tax Compliance Act (“FATCA”), we are pleased to confirm that on 29 November 2013 the Cayman Islands signed a Model 1(b) (i.e. non-reciprocal) intergovernmental agreement with the United States (“US IGA”).

The Cayman Islands government’s release can be found at: http://www.maplesandcalder.com/fileadmin/uploads/maples/Documents/PDFs/CaymanUSSignFATCAAgreementAndMinistersRemarks29Nov13.pdf

A copy of the US IGA can be found at: http://tia.gov.ky/pdf/USA-Cayman_FATCA_-_29_November_2013.pdf

A copy of our general legal update on FATCA and the US IGA can be found at: http://www.maplesandcalder.com/news/article/cayman-islands-signs-fatca-iga-with-us-639/

Although the US IGA has been executed, it will still need to be brought into force in both jurisdictions in accordance with applicable protocols, before coming into effect. Enabling legislation is in the process of being drafted for the Cayman Islands, which will assist in removing any issues of confidentiality when complying with reporting requirements.

FATCA and Cayman Islands SPVs (including Cayman CLO Issuers)

While the US IGA does not specifically address SPVs, Maples and Calder has been assisting ISDA, LSTA and SIFMA with proposals to US Treasury and the IRS to modify the Limited Life Debt Investment Entity (“LLDIE”) provision in the final FATCA regulations. Copies of these proposals are available from those industry bodies.

To the extent that such proposals, or variations thereof, are adopted into any revisions to the final FATCA regulations, we have confirmed with the Cayman Islands government that Cayman Islands SPVs should be able to obtain the benefit of any amendment to the LLDIE provision through the local legislation that will implement the terms of the US IGA into Cayman Islands law.

The US IGA specifically contemplates the ability of the parties to take the benefit of definitions in the relevant US FATCA regulations (i.e. the final FATCA regulations as may be amended).

Now that the US IGA has been signed, we expect legislation in the Cayman Islands to implement the terms of the US IGA to be drafted in the next two months.

One of the advantages of the Cayman Islands signing the US IGA is that, to the extent a Cayman Islands SPV cannot be treated as a certified deemed-compliant foreign financial institution (“FFI”), and is considered a Reporting FFI, withholding agents are not required to verify a Global Intermediary Identification Number (“GIIN”) on payments made prior to 1 January 2015, where the payee is a Model 1 Reporting FFI. Accordingly, Cayman Islands SPV’s can effect registration through to the end of 2014 and, if necessary, may self-certify their status to withholding agents after 1 July 2014 to avoid withholding.

If registration is required, or if it is considered beneficial for a Cayman Islands SPV to obtain a GIIN, our affiliate, MaplesFS, has established a FATCA team and developed a suite of products over the last two years to assist clients with their FATCA obligations.

The MaplesFS FATCA services include assisting with registrations to obtain GIINs, classification of accountholders and accounts, remediation and validation of Reportable Accounts, implementation of new on-boarding procedures and reporting.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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